Tracking the global housing market slowdown
Your international property and economics update tracking, analysing and forecasting trends from around the world.
3 minutes to read
Sales are slowing
Back in March 2020 as the world grappled with Covid-19 I created a trusty spreadsheet to track the anticipated slowdown in sales across global housing markets...one that never materialised.
Fast forward 30 months and that spreadsheet has been dusted off and is now coming into its own.
Housing markets are braced for a marked slowdown as buyers tighten their purse strings in response to gloomier economic prospects, rising mortgage costs and wider inflationary pressures.
What is the latest data telling us? A quick refresh of the spreadsheet reveals that at a country level Canada, New Zealand, the US and France have seen the biggest drop in sales transactions in the latest 12-month period.
Despite Sweden’s resilience, Nordic countries are particularly exposed given the high proportion of households on variable rate mortgages (44% in Sweden according to the European Mortgage Federation).
But the slowdown is taking longer to appear in some countries. Declines year-on-year are not yet evident in Spain, Portugal, Ireland or the UK although quarterly rates of growth are slowing in a number of these markets.
Clearly, it’s a nuanced picture and much depends on where in their property cycle each market currently sits. Those countries and territories likely to be most affected are markets that witnessed the biggest surge in prices during the pandemic and where price-to-income and price-to-rent ratios have detached.
Sign up to our Global House Price Index (56 countries and territories) and our Global Residential Cities Index (150 cities worldwide) to keep up to speed with the latest house price moves.
Second homes
Second home and resort markets are by virtue of their ‘discretionary’ status expected to be more vulnerable to the impending housing market downturn than cities. This was largely true in 2008.
The commonly held assumption is that cities will display a greater degree of resilience, boosted by a backlog of undersupply and stronger labour markets. Certainly, sales in London, New York and Paris, are holding up.
However, the pandemic may have a bearing on the performance of second homes in this downturn. The crisis sparked a significant reassessment of lifestyles and priorities with hybrid working giving rise to co-primary living – people spending longer in their second homes. Provence, Tuscany and Marbella have been amongst Knight Frank’s busiest markets over the last two years.
Our expectation is that second homes, a tangible asset increasingly used as a semi-permanent base by homeowners, and one that offers a reliable rental income as well as a lifestyle gain, will be a lot harder to relinquish this time round.
Support measures
A year ago, we expected 2022 to be ‘the year of the cooling measure’ as governments looked to curb stellar price growth. What a difference 12 months can make.
Now, most policymakers are having to take the opposite tack and introduce support measures, mostly aimed at improving affordability for first time buyers or keeping a lid on escalating rents, but some are aimed at attracting investment from high-net-worth individuals to bolster struggling economies.
To date we’ve seen the raising of the stamp duty threshold (UK), expanding the time limit between selling a private home and applying for public housing (Singapore), one-off tax-free payments to help with rents (Canada) a relaxation of lending rules for first time buyers (Ireland) and an abolition of the wealth tax (Andalucia, Spain).
We’ll be monitoring these new measures closely over the coming months, their differing objectives and their efficacy.
In other news…
Why Wall Street is splurging on family homes (The Economist), Greece to toughen golden visa rules in surprise move (International Investment), China’s local government financing vehicles go on land-buying spree (FT) and Hong Kong to cut property duties for non-permanent residents and relax visa rules to reverse brain drain (Bloomberg).